Retirement Needs Analysis

Transcription

1 Needs Analysis For: Bart and Kristin Jones Presented By: [Licensed user's name appears here]

2 Needs Analysis Preface General Comments A recent Gallup survey discovered a significant series of concerns regarding retirement planning. About half of those questioned felt that the benefits they expected to receive from pensions and other employment-related retirement programs would not be enough to take care of their needs. More than half were concerned that they might run out of all funds during retirement. Two-thirds were worried a catastrophic illness or needs for nursing home care would bankrupt them. Over 90% in the survey believed saving for their retirement represented their single most important long term financial goal. The purpose of the accompanying analysis is to compare your retirement income goals with the assets/benefits that you expect will be available to meet those goals. If there are not sufficient assets/benefits, recommendations regarding funding of a Target will be included in order to offset the shortfall. "Target " (also referenced as "TRA") is the specific allocation of funds that is accumulated during pre-retirement years and used for distribution during retirement years. Your Specific Analysis An analysis has been made of your retirement income goals compared to the expected assets/benefits that will be available to meet the goals. Based on this analysis, your expected assets/benefits will not be sufficient to meet your retirement income goals. Due to your shortfall of expected assets/benefits, it is necessary for you to fund a Target. In the material that accompanies this report, you will find a TRA illustrated utilizing an equity account plus a cash value life insurance policy. The precision of your analysis will be dependent upon the accuracy of the financial data utilized. You should be certain that the data is an accurate reflection of your economic expectations. It is important to remember that what is presented in the study is only a future "snapshot" of your retirement situation. Some of the premises and conditions may change. Each year, you should arrange for a review of the analysis in order to evaluate the consequences of modifications to the assumptions. By doing so, your retirement plan will always remain up to date. $500, ,000 $414,070 $167, ,000 $246, , Years At Year 20 Annual Income Required $414,070 Shortfall in Annual Income $167,092 Expected Annual Income from Current Assets/Benefits $246,978 This graphic assumes the non-guaranteed values shown continue in all years. This is not likely, and actual results may be more or less favorable. Page 1 of 18

3 Needs Analysis Flow Chart Pre- Phase Portion of Current Income Target Phase Expected Assets/ Benefits Income Page 2 of 18

4 Needs Analysis Cash Flow Summary for Years Utilizing Expected Assets/Benefits First Last Total For Cash Flow Year Year All Years Summary Income Goal 259, ,070 6,616,382 6,616,382 Estimate of Expected Cash Flow: Social Security 17,955 48, ,511 Certificate of Deposit 14,500 4, ,882 Bart's 401(k) 106, ,950 2,139,000 Kristin's 401(k) 51,750 50,743 1,033,993 Equity 36,572 36, ,440 Work After 25, ,000 Total Expected Cash Flow 252, ,978 5,168,826 (5,168,826) Shortfall in Expected Cash Flow 1,447,556 Conclusion and Recommendation We have compared the year-by-year relationships between the retirement income goals and expected retirement cash flow. Based on your assumptions, the timing of your expected cash flow is not sufficient to meet all your financial goals. An additional amount of funding should be directed to a Target in the amount of 10.24% of your assumed pre-retirement income starting at age 45. By doing so, your desired goals should then be assured -- based, of course, on the accuracy of the assumptions you have provided. Assumptions may change as economic circumstances change. It is strongly recommended you review this plan every year. Page 3 of 18

5 Needs Analysis Annualized Income Projections Current After Tax Income 100,000 of Current Income 5.00% Income Goal 252,695 of Income 2.50% Age at 65/63 Pre- Phase Phase Pre- Year Ages (1) Projected Pre- Income Incl. Year Ages (2) Desired Income Goal Incl. 1 45/43 100, /44 105, /45 110, /46 115, /47 121, /48 127, /49 134, /50 140, /51 147, /52 155, /53 162, /54 171, /55 179, /56 188, /57 197, /58 207, /59 218, /60 229, /61 240, /62 252, /63 259, /64 265, /65 272, /66 278, /67 285, /68 293, /69 300, /70 307, /71 315, /72 323, /73 331, /74 339, /75 348, /76 357, /77 365, /78 375, /79 384, /80 394, /81 403, /82 414,070 3,306,597 6,616,382 Income Goal After tax income in year before retirement: 252,695 Goal for retirement: 100% After tax income goal for retirement years: 252, % growth during first retirement year: + 6,317 After tax income in first retirement year: 259,012 Note: All projections are based on client furnished data and assumptions. Page 4 of 18

6 Needs Analysis Income Summary $500,000 $414,070 $375,000 $252,695 $250,000 $125,000 $ Years Projected Annual Pre- Income $414,070 Desired Annual Income Goal 1 $252,695 1 income fully funded by expected retirement assets/benefits and the TRA. Page 5 of 18

7 Needs Analysis Expected Assets/Benefits vs. Income Goals Expected Assets/Benefits Cash Flow Analysis Year Ages (1) Income from Social Security Benefits (2) Income from Certificate of Deposit (3) Income from Bart's 401(k) (4) Income from Kristin's 401(k) (5) Income from Equity (6) Income from Work After (7) Income from Expected Assets/ Benefits (8) Desired Income Goal Incl. (9) Additional Income Required (8) - (7) 1 65/63 17,955 14, ,950 51,750 36,572 25, , ,012 6, /64 18,404 14, ,950 51,750 36,572 25, , ,488 12, /65 18,865 14, ,950 51,750 36,572 25, , ,125 18, /66 32,557 14, ,950 51,750 36,572 25, , ,928 11, /67 33,370 14, ,950 51,750 36,572 25, , ,901 17, /68 34,205 14, ,950 51,750 36,572 25, , ,049 24, /69 35,060 14, ,950 51,750 36,572 25, , ,375 30, /70 35,936 14, ,950 51,750 36,572 25, , ,884 37, /71 36,835 14, ,950 51,750 36,572 25, , ,581 43, /72 37,756 14, ,950 51,750 36,572 25, , ,471 50, /73 38,700 14, ,950 51,750 36, , ,558 83, /74 39,667 14, ,950 51,750 36, , ,847 90, /75 40,659 14, ,950 51,750 36, , ,343 97, /76 41,675 14, ,950 51,750 36, , , , /77 42,717 14, ,950 51,750 36, , , , /78 43,786 14, ,950 51,750 36, , , , /79 44,879 14, ,950 51,750 36, , , , /80 46,002 14, ,950 51,750 36, , , , /81 47,152 14, ,950 51,750 36, , , , /82 48,331 4, ,950 50,743 36, , , , , ,882 2,139,000 1,033, , ,000 5,168,826 6,616,382 1,447,556 The expected assets/benefits shown above are based on client furnished data and assumptions. Page 6 of 18

8 Needs Analysis Sources of Annual Cash Flow $500,000 $414, ,000 $167, ,000 $48,331 $4,382 $106, ,000 $50,743 $36,572 0 $ Years At Year 20 Income Required $414,070 Target $167,092 Income from Social Security Benefits $48,331 Income from Certificate of Deposit $4,382 Income from Bart's 401(k) $106,950 Income from Kristin's 401(k) $50,743 Income from Equity $36,572 Income from Work After $0 Page 7 of 18

9 Needs Analysis Illustration of Values Used Eq. Indexed UL Interest Rate 8.50% Initial Payment 10,000 Initial Death Benefit 650,000 Year Male Age (1) Premium (2) Pre-Tax Policy Cash Flow from (3) Accum Value* (4) Cash Value* (5) Death Benefit , ,522 2, , , ,873 6, , , ,070 16, , , ,187 28, , , ,307 41, , , ,527 56, , , ,935 72, , , ,642 90, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 *This is an InsMark supplemental illustration for indexed universal life. In an actual presentation, this footnote will refer to a basic illustration from a specific life insurance company with important details, caveats, and guarantees. Page 8 of 18

10 Needs Analysis Illustration of Values Used Eq. Indexed UL Interest Rate 8.50% Initial Payment 10,000 Initial Death Benefit 650,000 Year Male Age (1) Premium (2) Pre-Tax Policy Cash Flow from (3) Accum Value* (4) Cash Value* (5) Death Benefit , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 *This is an InsMark supplemental illustration for indexed universal life. In an actual presentation, this footnote will refer to a basic illustration from a specific life insurance company with important details, caveats, and guarantees. Page 9 of 18

11 Needs Analysis Accumulating the Necessary Target (TRA) Insured is Male, Age 45 TRA Age 65/63 674,253 Portion of TRA in Eq. Indexed UL 464,540 Eq. Indexed UL Interest Rate 8.50% Portion of TRA in Equity Acc't 209,713 Allocation/Accumulation of the Target Pre- Year Ages (1) Projected Pre- Income Incl. (2) Target Allocation Required (3) Portion of TRA Used for Premium (4) Accum Values* (5) Cash Values* (6) Balance of Allocation To Equity (2) - (3) (7) Equity (8) Living TRA (5) + (7) (9) Death Benefit (10) Death Benefit of TRA (7) + (9) 1 45/43 100,000 10,235 10,000 9,522 2, , , , /44 105,000 10,747 10,000 19,873 6, ,063 7, , , /45 110,250 11,285 10,000 31,070 16,445 1,285 2,499 18, , , /46 115,763 11,849 10,000 43,187 28,562 1,849 4,619 33, , , /47 121,551 12,441 10,000 56,307 41,682 2,441 7,494 49, , , /48 127,628 13,063 10,000 70,527 56,633 3,063 11,202 67, , , /49 134,010 13,717 10,000 85,935 72,919 3,717 15,823 88, , , /50 140,710 14,402 10, ,642 90,650 4,402 21, , , , /51 147,746 15,123 10, , ,949 5,123 28, , , , /52 155,133 15,879 10, , ,940 5,879 36, , , , /53 162,889 16,672 10, , ,774 6,672 45, , , , /54 171,034 17,506 10, , ,620 7,506 55, , , , /55 179,586 18,381 10, , ,651 8,381 68, , , , /56 188,565 19,301 10, , ,064 9,301 82, , , , /57 197,993 20,266 10, , ,818 10,266 97, , , , /58 207,893 21,279 10, , ,508 11, , , , , /59 218,287 22,343 10, , ,194 12, , , , , /60 229,202 23,460 10, , ,181 13, , , , , /61 240,662 24,633 10, , ,830 14, , , , , /62 252,695 25,865 10, , ,540 15, , , , ,713 3,306, , , ,447 Management fees assessed on column (7): 0.70% *This is an InsMark supplemental illustration for indexed universal life. In an actual presentation, this footnote will refer to a basic illustration from a specific life insurance company with important details, caveats, and guarantees. Column (2) = 10.24% of assumed pre-retirement income starting at age 45. See the Equity Details and Portfolio Turnover Details reports (Pre- Phase) for calculations used. Calculations based on client's assumptions. Page 10 of 18

12 Needs Analysis Pre- Summary $300,000 $252,695 $225,000 $150,000 $75,000 $0 $25, Pre- Years At Year 20 Annual Allocation to Target $25,865 Projected Annual Pre- Income $252,695 Page 11 of 18

13 Needs Analysis Distributing the Target (TRA) TRA Age 65/63 674,253 Portion of TRA in Eq. Indexed UL 464,540 Eq. Indexed UL Interest Rate 8.50% Portion of TRA in Equity Acc't 209,713 Target Activity Year Ages (1) Additional Income Required (2) Premium (3) Income from Policy Cash Flow (4) Net Add'l Income Required (1) + (2) - (3) (5) Beginning of Year Balance in Equity Portion of TRA (6) Balance in Equity to Accrue (7) Equity (8) Cash Values* (9) Living TRA (7) + (8) (10) Death Benefit (11) Death Benefit of TRA (8) + (10) 1 65/63 6, ,000-33, , , , , , , , /64 12, ,000-27, , , , , , , , /65 18, ,000-21, , , , , , , , /66 11, ,000-28, , , , , , , , /67 17, ,000-22, , , , , , , , /68 24, ,000-15, , , , , , , , /69 30, ,000-9, , , , , , ,311 1,025, /70 37, ,000-2, , , , , , ,007 1,046, /71 43, ,000 3, , , , ,722 1,006, ,730 1,061, /72 50, ,000 10, , , , ,272 1,021, ,352 1,068, /73 83, ,000 43, , , , ,343 1,003, ,748 1,039, /74 90, ,000 50, , , , , , ,630 1,014, /75 97, ,000 57, , , , , , , , /76 105, ,000 65, , , , , , , , /77 113, ,000 73, , , , , , , , /78 121, ,000 81, , , , , , , , /79 129, ,000 89, , , , , , , , /80 138, ,000 98, , , , , , , , /81 147, , , , , , , , , , /82 167, , , , , , , ,894 1,447, , ,556 Management fees assessed on column (7): 0.70% *This is an InsMark supplemental illustration for indexed universal life. In an actual presentation, this footnote will refer to a basic illustration from a specific life insurance company with important details, caveats, and guarantees. See the Equity Details and Portfolio Turnover Details reports ( Phase) for calculations used. Calculations based on client's assumptions. Page 12 of 18

14 Needs Analysis Equity Details Rate 7.50% Dividend Rate 1.00% Dividend Tax Rate 20.00% Income Tax Bracket 31.00% Composite Capital Gains Tax Rate* 28.00% Turnover Assumption 50.00% Yr Ages (1) Beginning of Year Equity (2) Net Allocation + to Equity (3) Sale of Equities + (4) Capital (5) + Reinvested = Dividends (6) Before Turnover (7)** After Turnover (8) Dividends + (9) Equity Sales (10) Total = Distributions 1 65/63 209,713 33, ,257 1, , /64 257,791 27, ,411 2, , /65 302,288 21, ,285 2, , /66 342,779 28, ,839 2, , /67 392,919 22, ,137 3, , /68 439,400 15, ,150 3, , /69 481,817 9, ,846 3, , /70 519,749 2, ,193 4, , /71 552, , ,665 3, , /72 580, ,446 43, ,677 4,594 6,349 10, /73 602, ,174 42, ,393 4,508 38,578 43, /74 591, ,766 40, ,565 4,357 46,051 50, /75 571, ,613 38, ,513 4,135 53,777 57, /76 542, ,727 35, ,507 3,838 61,766 65, /77 503, ,120 32, ,762 3,460 70,029 73, /78 453, ,801 28, ,448 2,992 78,577 81, /79 392, ,787 22, ,672 2,429 87,425 89, /80 318, ,084 16, ,492 1,765 96,579 98, /81 231, ,709 9, , , , /82 129, , , , , ,648 25,313 37, , ,322 *The composite capital gains tax rate includes 50.00% short-term gains subject to ordinary income tax and 50.00% long-term gains subject to capital gains tax. The individual tax rates used to create the composite tax rate are: Capital Gains Tax: 25.00% Income Tax: 31.00% **Column (7) is reduced by a 0.70% management fee. (To review turnover calculations, see the Distribution Details of Portfolio Turnover report.) Capital gains tax calculations are based upon a ratio of asset value to remaining cost basis in any given year. Page 13 of 18

15 Needs Analysis Portfolio Turnover Details Rate 7.50% Dividend Rate 1.00% Dividend Tax Rate 20.00% Income Tax Bracket 31.00% Composite Capital Gains Tax Rate* 28.00% Turnover Assumption 50.00% Year Ages (1) Beginning of Year Cost Basis (2) Sale of Equities (3) Capital (4) Reinvested Dividends (5) Assets Before Turnover (6) Adjusted Cost Basis (7) Sale of Equities Caused by Turnover (8) Cost Basis Used by Turnover (9) Reinvested Turnover (10)** After Turnover 1 65/63 199, ,257 1, , , , , , , /64 245, ,411 2, , , , , , , /65 287, ,285 2, , , , , , , /66 325, ,839 2, , , , , , , /67 373, ,137 3, , , , , , , /68 417, ,150 3, , , , , , , /69 456, ,846 3, , , , , , , /70 492, ,193 4, , , , , , , /71 523, , , , , , , , /72 549,384 6,446 43, , , , , , , /73 569,925 39,174 42, , , , , , , /74 559,119 46,766 40, , , , , , , /75 540,310 54,613 38, , , , , , , /76 512,818 62,727 35, , , , , , , /77 475,933 71,120 32, , , , , , , /78 428,907 79,801 28, , , , , , , /79 370,948 88,787 22, , , , , , , /80 301,213 98,084 16, , , , , , , /81 218, ,709 9, , ,002 66,534 58,501 64, , /82 122, , , ,648 25,313 *The composite capital gains tax rate includes 50.00% short-term gains subject to ordinary income tax and 50.00% long-term gains subject to capital gains tax. The individual tax rates used to create the composite tax rate are: Capital Gains Tax: 25.00% Income Tax: 31.00% *Column (10) is reduced by a 0.70% management fee. Capital gains tax calculations are based upon a ratio of asset value to remaining cost basis in any given year. Page 14 of 18

16 Needs Analysis Summary $500,000 $414,070 $375,000 $250,000 $167,092 $125,000 $ Years At Year 20 Desired Annual Income Goal $414,070 Portion Funded By Target 1 $167,092 1 Balance of retirement income goal fully funded by expected retirement assets/benefits. Page 15 of 18

17 Needs Analysis Summary Analysis Pre- Phase Phase Pre- Year Ages (1) Projected Pre- Income Incl. (2) Target Allocation Required (3) Living Target (4) Death Benefit of Target Year Ages (5) Desired Income Goal Incl. (6) Portion of Column (5) Funded by Target * (7) Living Target (8) Death Benefit of Target 1 45/43 100,000 10,235 2, , /44 105,000 10,747 7, , /45 110,250 11,285 18, , /46 115,763 11,849 33, , /47 121,551 12,441 49, , /48 127,628 13,063 67, , /49 134,010 13,717 88, , /50 140,710 14, , , /51 147,746 15, , , /52 155,133 15, , , /53 162,889 16, , , /54 171,034 17, , , /55 179,586 18, , , /56 188,565 19, , , /57 197,993 20, , , /58 207,893 21, , , /59 218,287 22, , , /60 229,202 23, , , /61 240,662 24, , , /62 252,695 25, , , /63 259,012 6, , , /64 265,488 12, , , /65 272,125 18, , , /66 278,928 11, , , /67 285,901 17, , , /68 293,049 24, , , /69 300,375 30, ,878 1,025, /70 307,884 37, ,433 1,046, /71 315,581 43,974 1,006,387 1,061, /72 323,471 50,943 1,021,949 1,068, /73 331,558 83,086 1,003,736 1,039, /74 339,847 90, ,170 1,014, /75 348,343 97, , , /76 357, , , , /77 365, , , , /78 375, , , , /79 384, , , , /80 394, , , , /81 403, , , , /82 414, , , ,894 3,306, ,447 6,616,382 1,447,556 This is an InsMark supplemental illustration for indexed universal life. In an actual presentation, this footnote will refer to a basic illustration from a specific life insurance company with important details, caveats, and guarantees. *Balance of column (6) funded by the expected retirement assets/benefits. See the accompanying reports for details of assumptions, data, and logic used to generate the values illustrated. Page 16 of 18

18 Needs Analysis Summary Analysis Pre- Phase Cumulative Pre- Income (Years 1-20) 3,306, ,447 Cumulative Allocation to Target (Years 1-20) Phase Cumulative Income Goal (Years 21-40) 6,616,382 1,447,556 Portion of Goal Funded by Target (Years 21-40) 1 1 Balance of retirement income funded by expected retirement assets/benefits. Page 17 of 18

19 Needs Analysis Target Summary $1,200,000 $900,000 $600,000 $300,000 $363,894 $299,612 $ Years At Year 40 Living Values of Target $299,612 Death Benefit Values of Target $363,894 Page 18 of 18